6 Lessons in Corporate Ethics from the GM Recall

Business.com / Managing / Last Modified: February 22, 2017

The GM recall reminded the American car giant that with great power comes great responsibility. Learn from their mistakes with these 6 tips.

General Motors allegedly knew about faulty ignition switches linked to 27 deaths and 25 serious injuries (with over a thousand injury claims still to be considered) for more than a decade. Yet it took a wrongful death suit to force release of internal documents disclosing this knowledge to finally initiate a vehicle recall in February 2014.

In addition to the lives lost and people injured, the company has suffered a public relations nightmare that has not only cost it millions of dollars in potential fines and lawsuits, but also seriously tarnished its brand.

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Why didn’t GM act in a responsible manner? According to a Washington Post report, the answer is a corporate culture afraid to pass along bad news. This latest misconduct from GM joins a series of similar stories about serious breaches in corporate ethics that show, at the very least, a lack of common sense..

Stan Mack at Demand Media is quick to point out that ethical business practices shouldn’t stem from financial motivation alone. They should be based on a desire to promote honesty and integrity. But public scandals can damage and possible permanently ruin your business financially. Just ask GM.

Here’s what your business can do to avoid the knee-jerk “no one will ever notice” response to owning up to mistakes.

1. Publish a Corporate Ethical Code

Require all employees to read and sign a corporate ethics code. This might seem like a simple set of ground rules and in many cases, it is. But merely having a code isn’t enough. It could be just like those software agreements everyone signs without really paying attention to whenever you install an upgrade. You need to ensure your employees know the code and follow it.

2. Get “Buy-In” From Employees

Employees who are actively involved in establishing their company’s ethical code are more likely to act in the prescribed manner. According to Inc., when ethical dictates are delivered in a top-down manner, employees tend to regard the code as out-of-touch with the issues they face on a daily basis, largely because it usually is. Top management can’t know what issues employees face.

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3. Continually Revisit the Ethical Code

If you already have an established ethics policy, don’t assume you can just check that item off your bucket list. You need to present it to new hires, vendors, and partners. Moreover, at least once a year ask employees to re-examine your code, ask for comments, and make sure it applies to everything you’re doing. Even if there is nothing to change, it’s not a bad idea to remind everyone of their commitment to act as responsible employees and partners.

4. Confront Perceived Unethical Behavior Immediately in an Ethical Matter

If you or a colleague thinks something is unethical, the next step is to hold a private meeting with all parties involved. Bring in your HR person or some other objective third party to assess all viewpoints, determine what has happened and next steps. This could range from correcting what was simply a mistake or an oversight all the way to dismissal. Treating employees fairly, even if they’ve done something wrong or unethical, is an ethical principle in its own right.

5. The Truth Always Comes Out

If you’ve found a problem, tell your company and your customers what happened and how you intend to fix it. Don’t wait for someone else to do it for you. Remember, if you’ve found a problem, more than likely someone else has or will.

6. Practice What You Preach

There’s little point to having a code of ethics if you make exceptions to the rule. Everyone in your company must act ethically, regardless of how long they’ve been with you, their past contributions or performance reviews, their position in the company, or even whether they are a family member. The only way to run an ethical company is for the company to promote and act in an ethical manner, no exceptions.

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